Brookfield Property Partners L.P. C O R P O R AT E P R O F I L E M AY 2017
Table of Contents Overview of Brookfield Property Partners ( BPY ) Page 4 Organic Growth Page 10 Operating Segments Page 16 Developments and Redevelopments Page 25 Appendix Structure and Governance Page 30 2
BPY is Brookfield Asset Management s ( Brookfield ) primary vehicle to make investments across all strategies in real estate Our goal is to be the leading global owner and operator of high-quality real estate, generating an attractive total return for our unitholders comprised of: 1 Current yield supported by stable cash flow from a diversified portfolio of assets 2 5% 8% annual distribution growth 3 Capital appreciation of our asset base 3
Overview of Brookfield Property Partners 4
Global Owner, Developer and Operator of Diversified, High-Quality Real Estate $66B 1 TOTAL ASSETS 1 $22B UNITHOLDER EQUITY 2 $0.295 QUARTERLY DISTRIBUTION / UNIT 3 5.3% DISTRIBUTION YIELD Investment Portfolio Characteristics Core Office 146 premier office properties totaling 101 million square feet (msf) in gateway markets around the world as well as 10 msf of core office and multifamily development projects currently underway Core Retail 127 best-in-class retail properties totaling 125 msf throughout the United States (via 34% fully diluted interest in GGP) Opportunistic High-quality assets with operational upside across multifamily, industrial, hospitality, triple net lease, self storage, student housing and manufactured housing sectors 1) As of March 31, 2017 and on a proportionate basis. 2) As of March 31, 2017. 3) As of closing price on NYSE on March 31, 2017 and assuming $1.18 annual distribution per unit. 5
Investment Segments Stable cash flows on core portfolios enhanced by investment in opportunistic strategies Core Office and Core Retail Opportunistic Brookfield Place, New York Fashion Show Mall, Las Vegas St. Mary s Square, North Carolina Targeting 10% to 12% Total Returns Currently 80% of BPY s balance sheet Invested in high-quality, well-located trophy assets and development projects Targeting 20% Total Returns Currently 20% of BPY s balance sheet Invested in mispriced portfolios and/or properties with significant value-add 6
Global Investor with Local Expertise ~$151B Total RE AUM 1 30 Offices ~250 Investment Professionals ~16K Operating Employees 2 CANADA $6.9B UK & EUROPE $23.7B ASIA & AUSTRALIA $11.7B UNITED STATES $105.7B BRAZIL $3.3B 1) At the Brookfield Property Group level which includes assets of BPY and Brookfield-managed funds. 2) Employee figures are as of December 31, 2016. 7
Proven Investment Approach Value-oriented, counter-cyclical investors Specialize in executing multi-faceted transactions that allow us to acquire high-quality assets at a discount to replacement cost Leverage our business units to enhance the value of our investments Flexibility to allocate capital to the sectors and geographies with the best risk-adjusted returns at various points in the real estate cycle Continually recycle capital from stabilized assets to higheryielding opportunities in order to build long-term value for unitholders 8
Conservative Financing Strategy We finance our investments predominantly with asset-level, non-recourse debt We raise debt financing in local currency with primarily fixed interest rates We source the lowest-cost capital to fund growth Recycle capital from stabilized assets Consider issuing equity if expected returns exceed our cost of capital We target a distribution payout ratio of 80% of Company FFO Retain sufficient cash flow for tenant improvements and leasing costs Raise third-party capital for acquisitions and large-scale developments Our investment-grade corporate credit rating provides financing flexibility The quality and diversification of our assets support our target of achieving long-term proportionate debt-to-capital of up to 50% 9
Organic Growth 10
BPY s Unique Growth Drivers Strong global operating capabilities enable us to acquire real estate in need of leasing, capital or repositioning, to generate core-plus returns Extensive development pipeline assembled over time in premium, supply-constrained markets Access to opportunistic real estate returns through ability to invest in Brookfield-sponsored real estate funds 11
A Compelling Combination of Current Yield and Organic Growth Yield backed by stable and secure cash flow from a portfolio of high quality assets Attractive entry point at significant discount to IFRS value A $22 per unit investment today has the potential to offer a very attractive return to unitholders: $ 77 Current Yield (5% 8% distribution growth) 13% CAGR $ 45 Appreciation (Multiple of 8 11% FFO growth) $ 22 Investment (as of NYSE price on 3/31/17) Today Year 5 1 Year 10 1 1) Based on midpoint of targeted distribution and earnings growth. 12
Future Drivers of Earnings Growth To date, we have benefited from earnings growth driven by lease-up of Brookfield Place New York and reallocation of capital to higher-returning opportunistic strategies Over the next five years, growth will be driven by three things: Company FFO / Unit 8-11% CAGR $1.36 $2.00 - $2.30 Contribution from active developments Reinvestment of capital at higher returns $1.11 $1.18 Same-store growth of 2% - 3% 2014 2015 2016 2021 1 1) Based on midpoint of targeted distribution and earnings growth. 13
Distribution / Earnings Ratio Conservative payout ratio and diversity of cash flows provides support for current yield Distribution growth in-line with earnings growth: $2.00 - $2.30 $1.60 - $1.85 ($ per unit) Funds from operations $ 2.00 $1.18 $1.06 $1.36 $1.12 5-8% CAGR 90% 82% 80% Average annual realized gains 0.35 Second generation leasing costs (0.35) Sustaining capital expenditures (0.15) Annual non-cash rents (0.10) Adjusted AFFO $1.75 2015 2016 2021 Historic Distribution Future Distribution Company FFO 14
Looking forward, we are positioned to increase earnings from leasing and development activities in our core office and retail businesses... and to realize value from the capital we have invested in our opportunistic strategy 15
Operating Segments 16
Core Office Portfolio Iconic assets in gateway markets Darling Park, Sydney Brookfield Place, New York Brookfield Place, Toronto Canary Wharf, London 17
Core Office Portfolio 146 premier office properties totaling more than 100 msf in gateway cities around the globe, including: New York, London, Toronto, Los Angeles, Houston, Sydney, Washington, DC and Berlin Portfolio is 92% leased with an average lease term of over 8 years Embedded 17% mark-to-market opportunity on expiring leases Properties generally financed with non-recourse, asset-level debt We offer an integrated, multifaceted real estate business with comprehensive operating and real estate management capabilities Our diversified global structure gives us a competitive advantage in the marketplace as we are able to leverage relationships across geographies and business lines Of our top 20 office tenants, 13 are tenants in Brookfield buildings in more than one city; 9 are tenants in at least three cities 18
Core Retail Portfolio Trophy retail assets that mirror the quality of our office properties The Woodlands Mall, Houston Ala Moana, Honolulu Jordan Creek, Des Moines Miami Design District 19
Core Retail Portfolio 127 best-in-class malls and urban retail properties totaling over 125 msf throughout the United States 95% same-property occupancy Average rent spreads of 20% on leases commencing in 2016 2017 Highly productive stores with $591 average tenant sales/sf Investment through 34% fully-diluted interest in GGP Inc. 20
Class A+ Shopping Centers Our class A+ mall portfolio represents approximately 100 of the top 500 malls in the United States. Although total retail space in the U.S. is likely to contract in the coming years, high-quality malls continue to demonstrate meaningful outperformance and serve as the centerpiece of all retail activity in the U.S. The declining performance of traditional department stores has created opportunities to recapture square footage within our existing centers and improve their productivity by introducing more dining, entertainment and fitness venues as well as e-retailer pop-up and permanent stores Development and redevelopment initiatives in our core retail portfolio total $1.3 billion (~$442 million at BPY s share), of which $0.7 billion is currently under construction with a further $0.6 billion in the pipeline. The projects are earning 6% 10% yields on cost Inserting new technology into our malls has been a major driver to elevate the shopping experience from retail and dining to entertainment and leisure 21
Opportunistic Portfolio Acquiring mispriced assets with upside to earn outsized returns The Diplomat, Florida Center Parcs, UK Triple Net Lease Portfolio, U.S. Roosevelt Landing, New York 22
Opportunistic Strategy Acquire high-quality assets at a discount to replacement cost or intrinsic value Invest on a Value Basis Execute multifaceted transactions that utilize structuring capabilities Seek contrarian investments via market dislocations and other inefficiencies Leverage Brookfield Platform Focus on geographies and sectors where Brookfield has informational, operational and other competitive advantages Utilize Brookfield s relationships to originate proprietary investments Target large-scale investments Execute clearly defined strategies for operational improvement: Enhance Value through Operating Capabilities Leasing: increasing occupancy and rental rates Development: expanding or redeveloping properties Achieve opportunistic returns through NOI growth 23
Funding Our Opportunistic Strategy We have approximately $4.9 billion of capital invested in opportunistic real estate strategies The majority of this capital is invested primarily through LP investments in Brookfield s real estate funds franchise These funds have finite lives with five-year average investment holds and generally are targeting 20%+ returns and 2.0x MOCs As these funds mature and begin to return capital, proceeds will be redeployed in future funds or in other investments BPY s opportunistic investment strategy will largely be self-funding as we have begun harvesting investments from legacy funds 24
Developments and Redevelopments 25
Development Strategy We opportunistically pursue developments to: Earn premium risk-adjusted returns compared to acquisitions Upgrade our portfolio with new, trophy assets in key strategic markets Development strategy seeks to limit risk: Typically secure anchor leases for 40% 50% of space before launching project Execute guaranteed maximum price contracts to reduce construction risk Bring in JV partners once project is substantially de-risked Limit developments to less than 10% of total assets Prominent, large-scale projects primarily in the high-growth markets of London and New York City Active office and multifamily projects expected to produce over $320 million of incremental NOI upon completion 26
Active Development Projects Office % Pre-Leased SF 000s Total Cost 1 Yield on Cost Completion Date of Date of Cash Stabilization L Oreal Brazil HQ, Rio de Janeiro 100% 197 $43 12% Q1 2017 Q4 2017 Brookfield Place East Tower, Calgary 81% 1,400 545 8% Q3 2017 Q3 2018 London Wall Place, London 71% 505 255 7% Q2 2017 Q2 2020 One Manhattan West, New York 37% 2,117 1,063 6% Q4 2019 Q4 2020 655 New York Avenue, Washington DC 70% 766 285 7% Q3 2018 Q2 2021 100 Bishopsgate, London 60% 938 1,098 7% Q4 2018 Q1 2023 1 Bank Street, London 40% 715 310 7% Q3 2019 Q1 2023 Subtotal 58% 6,638 $3,599 7% Multifamily Three Manhattan West, New York 587 $414 5% Q3 2017 Q3 2018 Village Gateway, Camarillo (California) 413 127 7% Q3 2018 Q1 2019 Studio Plaza, Silver Spring (Maryland) 343 106 7% Q1 2019 Q4 2019 Greenpoint Landing Bldg. G, New York 250 273 6% Q1 2019 Q4 2019 New District 8 Water St. & 2 George St., London 371 190 5% Q4 2019 Q4 2020 Newfoundland, London 546 303 4% Q4 2019 Q4 2020 Principal Place Residential, London 2 303 238 17% Q1 2019 Q1 2019 One and Three York Square & Belvedere Gardens Residential, London 2 529 206 21% Q3 2019 Q3 2019 New District 10 Park Drive, London 2 269 147 23% Q4 2019 Q4 2019 Subtotal 3,611 $2,004 10% Total Development 10,249 $5,603 1) In US$ Millions and represents BPY s share of investment. 2) Represents condominium/market sale developments. Completion date and anticipated return on cost are presented instead of cash stabilization and yield on cost, respectively, for these developments. 27
Redevelopment Strategy We leverage our in-house design, construction, operations, leasing and real estate management teams to perform a 360-degree assessment of a property s refurbishment and repositioning potential We time our initial investment to maximize returns (e.g. upon an anchor tenant s relocation announcement) We are able to charge higher rents and subsequently earn higher returns on our investment following the repositioning effort Our integrated capabilities provide the opportunity to redevelop high-quality, well-located assets that have leasing challenges or CapEx needs 28
Redevelopment: 5 Manhattan West With 100,000+ sf floor plates and 16-foot ceilings, property is ideally suited for tech and media tenants Investing $312 million to upgrade building, incorporating it into Manhattan West project New glass façade New lobby Replaced elevators and HVAC Anticipated connection to High Line 5 Manhattan West, New York (Before redevelopment) Executed leases with tech- and media-sector tenants totaling more than 400,000 sf Currently negotiating leases with asking rates starting at $90/psf Expect to generate incremental NOI of $56 million or an 18% yield on cost 5 Manhattan West, New York (Post-redevelopment rendering) 29
Appendix Structure and Governance 30
Corporate Structure Brookfield Asset Management (BAM) 30% 61% 63% 1 75% Brookfield Infrastructure Partners (BIP) Brookfield Renewable Partners (BEP) Brookfield Property Partners (BPY) Brookfield Business Partners (BBU) Core Office Core Retail Opportunistic Brookfield Office Properties Canary Wharf Core-plus funds GGP Inc. Real estate opportunity funds Multifamily funds Real estate finance funds Other direct investments 1) On a fully-exchanged basis, assuming the exchange of all of the issued and outstanding securities that are exchangeable into BPY units. 31
Governance BPY has entered into a Master Services Agreement with Brookfield Provides executive oversight of BPY and services relating to the origination of acquisitions, financings, business planning and supervision of day-to-day management and administration activities Management fees equal to $50 million plus 1.25% of the increase in BPY s market capitalization over the initial capitalization of $11.5 billion Credit applied for management fees paid on investment in Brookfield-sponsored funds Incentive distributions based upon increases in distributions paid to unitholders over pre-defined thresholds 15% participation by Brookfield in distributions over $1.10 per unit 25% participation by Brookfield in distributions over $1.20 per unit Credit applied for incentive fees paid on investments in Brookfield-sponsored funds BPY s general partner has a majority of independent directors BPY s governance is structured to provide alignment of interests with unitholders 32
Favorable Structure As a global real estate investor, we have structured BPY to provide flexibility to pursue its strategy and to limit negative tax consequences to our unitholders BPY is a Bermuda-based, publicly-traded partnership that owns or has interests in holding corporations primarily in the U.S., Canada, Australia, Western Europe, Brazil, India and South Korea Structure is favorable relative to Master Limited Partnerships (MLPs), and we are committed to structuring our activities to avoid generating UBTI and ECI 1 BPY s Structure Type of Entity UBTI 1 ECI 1 U.S. Tax Slip Issued Canadian Tax Slip Issued Bermuda-based, publicly-traded partnership No No K1 T5013 1) No assurance can be provided that BPY and the operating partnership will be free from UBTI (unrelated business taxable income) or ECI (effectively connected income) in the future. BPY does not provide legal or tax advice to any third party and as such strongly recommends that each prospective investor review all documentation with their legal and tax advisors. 33
Contacts Contact Title E-Mail Address Phone Number Brian Kingston Chief Executive Officer brian.kingston@brookfield.com (212) 978-1646 Bryan Davis Chief Financial Officer bryan.davis@brookfield.com (212) 417-7166 Matt Cherry SVP, Investor Relations matthew.cherry@brookfield.com (212) 417-7488 34
Special Note Regarding Forward-Looking Statements All amounts are in U.S. dollars unless otherwise specified. Unless otherwise indicated, the statistical and financial data in this document is presented as of March 31, 2017. This presentation contains forward-looking information within the meaning of Canadian provincial securities laws and applicable regulation and forward-looking statements within the meaning of safe harbor provisions of the United States Private Security Litigation Reform Act of 1995. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding our operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as expects, anticipates, plans, believes, estimates, seeks, intends, targets, projects, forecasts, likely, or negative versions thereof and other similar expressions, or future or conditional verbs such as may, will, should, would and could. Forward-looking statements include, without limitation, statements about target earnings and distribution growth, the growth potential of our existing and new investments, return on invested capital, gains on mark-to-market releasing and occupancy, targeted same-store growth and returns on redevelopment and development projects, the availability of suitable investment opportunities, and the availability of financing and our financing strategy. Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forwardlooking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: risks incidental to the ownership and operation of real estate properties including local real estate conditions; the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the ability to enter into new leases or renew leases on favorable terms; business competition; dependence on tenants financial condition; the use of debt to finance our business; the behavior of financial markets, including fluctuations in interest and foreign exchanges rates; uncertainties of real estate development or redevelopment; global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; risks relating to our insurance coverage; the possible impact of international conflicts and other developments including terrorist acts; potential environmental liabilities; changes in tax laws and other tax related risks; dependence on management personnel; illiquidity of investments; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom; operational and reputational risks; catastrophic events, such as earthquakes and hurricanes; and other risks and factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States. We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise. This presentation makes reference to net operating income ( NOI ), funds from operations ( FFO ), and Company FFO. NOI, FFO and Company FFO do not have any standardized meaning prescribed by International Financial Reporting Standards ( IFRS ) and therefore may not be comparable to similar measures presented by other companies. The Partnership uses NOI, FFO and Company FFO to assess its operating results. These measures should not be used as alternatives to Net Income and other operating measures determined in accordance with IFRS but rather to provide supplemental insights into performance. Further, these measures do not represent liquidity measures or cash flow from operations and are not intended to be representative of the funds available for distribution to unitholders either in aggregate or on a per unit basis, where presented. For further reference, specific definitions of NOI, FFO, and Company FFO are available in the Partnership s press releases announcing its financial results each quarter. 35